Canada’s economy stands to benefit significantly from the removal of internal trade barriers among its 13 provinces and territories, with a potential real GDP increase of nearly seven percent, equivalent to $210 billion, over time, according to a recent report by the International Monetary Fund (IMF). The report suggests that regulatory barriers within the country impose a national average tariff of about nine percent, rising to over 40 percent in service sectors like healthcare and education.
The impact of these barriers is disproportionately felt by smaller provinces and northern territories, resulting in higher costs compared to larger provinces. The report indicates that eliminating these barriers would particularly benefit the Atlantic provinces, with Prince Edward Island potentially seeing a substantial increase in real GDP per worker.
Alicia Planincic, director of policy and economics at the Business Council of Alberta, highlighted that the presence of these barriers has fragmented Canada’s economy into separate entities, hindering economic growth and job mobility across provinces. While some progress has been made at the provincial level, challenges remain in aligning regulations and rules across jurisdictions to facilitate smoother interprovincial trade.
The movement to address internal trade barriers gained momentum following trade tensions with the United States, prompting governments to focus on domestic trade opportunities. While efforts have been made to address trade barriers, especially in goods, services – which represent a significant portion of internal trade costs – have not been fully addressed. The onus is now on provinces to overcome the complexities and political will required to harmonize regulations and boost productivity across the country.